Cash is king
Last week ended with the dollar falling to a 20-month low and
global markets turning down on concerns of the U.S. budget and trade deficits
and a possible move by China to diversify its dollar holdings. While a weaker
dollar might ordinarily help bring the U.S. trade deficit back into balance,
with a Chinese currency fixed relative to the dollar, the only thing we really
will get is more inflation and higher interest rates.
As loyal readers are well aware, this dynamic has been a core
concern of mine for months but the markets continue to shrug this concern off —
until the small hiccup last week. I for one have been planning on a December
downturn and see the current rally as nothing more than the usual seasonal
bacchanal — robust though it has been. Enjoy it all while it lasts but at this
point I’d rather be in cash or short than long on the broad U.S. indices.
This Week’s Market Movers
This will be a big week on the data front. For starters, the
housing sector will see both existing and new home sales fly on Tuesday and
Wednesday, respectively. The Fed’s Beige Book comes out, too, on Weds along
with a revision to the 3rd quarter GDP. Starting the new month on Friday, we’ll
also get the ISM index and auto sales. All this adds up to a volatile week. No
one indicator stands out as a market mover but coupled with the aforementioned
pressure on the dollar, this week would feature a distribution day or two.
Navarro’s Portfolio Shorts and Longs
Cash is king for the risk averse. If you want to try to pick
a top, short the Spiders
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Peter Navarro is a business professor at the
University of California and the author of the best-selling investment book
“If It’s Raining in Brazil, Buy Starbucks†and the business shelf bestseller
The Well-Timed Strategy.†His latest book is “The
Coming China Wars.â€